Abstract:    Technological innovation is an essential determinant for countries to promote economic growth and corporates to maintain competitive advantages. The past 40 years of reform and opening-up has seen a rapid growth of science and technology in China, but there is still much to improve in several high-tech fields. Under the background of Sino-US trade friction, nowadays the importance of improving corporate innovation is becoming increasingly prominent.
    With the development of behavioral finance, more and more scholars have turned their attention to the impact of decision makers′ personal background and experience on innovation. Existing literature has focused on the innovative effects of managers′ specific background characteristics, including personal ability, overseas experience, military experience, pilots′ experience and early disaster experience. However, there is a lack of research on the impact of decision makers′ experience diversity on corporate innovation and its underlying mechanisms.
    This paper aims to explore the impact of the experience diversity of corporate decision makers, namely chairman and CEO, on corporate innovation and its underlying mechanism. Our hypotheses are as follows: (1) Upper echelon theory proposes that organizational outcomes, strategic choices and performances levels are partially affected by managerial background characteristics. Previous studies in psychology have identified that openness to experience, one of the big five factors that define personality, is fundamental to creativity and innovation. This insight is confirmed in a survey that successful innovators are constantly trying out new experiences and piloting new ideas, since experienced CEOs tend to be risk-taking, are creative, and open to new ideas, possessing the intrinsic motivation to pursue innovation. Therefore, decision makers with more diversified experiences tend to positively affect corporate innovation. (2) Unlike routine tasks, innovative projects normally involve a long-term multi-stage process that is full of uncertainty. Due to the future contingencies and intrinsically risky processes, exceptional tolerance for failure is necessary for effective innovation. Previous studies show that the optimal incentive mechanism that motivates innovation rewards long-term success but tolerates early failure. Consequently, firms led by decision makers with more diversified experiences tend to have a better performance on innovation. We conjecture that decision makers with more diversified experiences are more likely to exploit innovative projects because they are less sensitive to the risk of termination, given their more diversified experiences. Therefore, decision makers with more diversified experiences can facilitate corporate innovation by forming a more failure-tolerant culture. (3) Collaborative innovation means the innovative output results from collaborative research carried out corporates and their partners, including individual inventors, government, university researchers, and labs. Decision makers who have diversified working, studying and other experiences are more likely to have a broader social network for they can more easily get acquainted with colleges, school mates and people encountered at other places. Decision makers who have worked in multiple positions, firms, and industries may also accumulate relevant knowledge that can be very useful when firms need to invest in collaborative projects. Therefore, decision makers with more diversified experiences can facilitate corporate innovation by extending collaborative innovation network. (4) Inventors, defined as people with patents, are the main participants engaging in corporates′ R&D activities and innovative projects. Decision makers with diversified experiences provide inventors a more diversified and tolerant culture, which may attract talented inventors to corporates led by decision makers with diversified experiences. Thus, one way that decision makers with diversified experiences may enhance innovation is by hiring more and talented inventors to work for the firm. Therefore, decision makers with more diversified experiences can facilitate corporate innovation by attracting talented inventors.
    We choose China for this study because China is an emerging market with support of innovative advances. Although China has undergone rapid economic growth since the 1980s, and has developed market economy system, it is still an emerging economy with weak legal institutions, weak investor protection, and less effective corporate governance. CEO and chairman of the board have strong control power over a firm′s strategies and decision-making processes than their peers in western countries.
    We use principal component analysis (PCA) to construct decision makers′ experience diversity indexes from their work, study and other personal experiences. To construct an experience diversity index using PCA, we consider the working, studying, and other personal experiences of decision makers, which captures fifteen aspects of decision makers′ past experiences.  
    Our sample firms are Shanghai Stock Exchange (SHSE) and Shenzhen Stock Exchange (SZSE) non-financial listed firms during the period 2001-2015. We choose 2001 as the beginning year of the sample period because firms start to disclose information of managerial experiences in 2001. Patents data and financial data are from CNRDS and CSMAR database respectively. Observations with missing variables are exclude and all continuous variables are winsorized at 1% level at both tails of their distributions.
    We have several important findings. (1) Decision makers with more learning, work and other personal experiences can improve their company′s innovation quantity, innovation quality and innovation diversification. (2) Decision makers′ experience diversity can promote corporate innovation through three mechanisms: increasing failure tolerance, promoting collaborative innovation and encouraging inventors. (3) Decision makers′ experience diversity plays a more significant role in promoting innovation performance of high-tech corporates, growth corporates and state-owned corporates. The above results remain robust after controlling for other factors, endogenous test and adding a competitive explanation. Our results are robust to a series of robustness checks, including endogenous tests and alternative model specifications. Alternative explanations are also ruled out. 
    Compared with previous studies, this paper has the following two contributions. First, this paper enriches the relevant research on the economic consequences of decision makers′ background. The existing studies mainly focus on the economic consequences of decision makers′ background experience in a single aspect, such as overseas experience, financial and military experience. This paper, based on a comprehensive research perspective, examines a diversity of decision makers′ experience, thus proves corporates′ decision makers draw on theory and practice skills gained throughout working, studying and other personal experiences when they make corporate decisions. Second, this paper proposes and tests the mechanisms of decision makers′ experience diversity on corporate innovation, thus deepens and expands the relevant research.
    This paper has several theoretical and policy implications. In theory, this paper enriches the literature in the field of economic consequences of executive background experience. Through exploring the impact of decision makers′ experience diversity on corporate technological innovation, this paper verifies whether decision-makers will make use of their practical skills acquired in their work, learning and other experiences in decision-making. In terms of policy, this study shows that when selecting decision makers, corporates should not only attach importance to professional knowledge, but also to various backgrounds such as work experience, learning experience and other personal experiences. The rich experience of corporate decision-makers can shape a failure-tolerant corporate culture, expand the collaborative innovation network of corporates, and help corporates better identify and motivate inventors. Therefore, choosing decision makers with rich experience can help to promote corporate innovation culture better and provides a corresponding talent guarantee for corporate innovation.

Key words:  experience diversity, innovation, failure tolerance, collaborative innovation, inventor